Cost Recovery in the Law Firm Library a New Zealand Perspective
Jane Treadwell
Principal, Know Where Limited, Information Management Consultants
Auckland, New Zealand
Gail Dallimore
Manager, Research and Library Services
Bell Gully, Auckland, New Zealand
INI110DUC110N
From the mid-1980s, when New Zealand experienced a growth in the number of law firms
employing law librarians, most, if not all, disbursement costs associated with the library
were passed on to the client These included long distance telephone calls, facsimile charges,
internal as well as external photocopying, online searching and costs associated with
obtaining judgments Whilst this cost-recovery process was new for librarians with a
traditional view on charging for library services, it did fall in line with the other internal
firm practices of charging for services
The '1987 crash' brought to a head the examination of all facets of a law firm's business
operation. Many New Zealand law librarians found
the spotlight on their libraries and library expenditure These were perceived as
areas of legal practice where fees were not a tangible and measurable factor, and
where considerable cuts might be made
The slash and burn environment that
prevailed at the time meant that every aspect of library management was examined
minutely and law librarians had to justify every subscription and every cent of
expenditure 1
It was in this environment that New Zealand law librarians began to look at other ways of
adding value to their work They needed to openly demonstrate the value of their work
and its contribution to the overall business of the law firm As a result New Zealand law
librarians began recording and charging their research time
THE PRACI1C:ALIIIES
Di1bursement Co1t Recovery
All disbursable expenditure incuned on behalf of a client is charged back to that client's
file via a disbursement slip An equivalent or pro-rata credit is logged in the library budget
In some cases a premium is added to the cost of the item In others, a flat rate is established
for some types of cost For example, umeported judgments can range markedly in price
depending on their source In one firm, a firm-wide fee of $30 is charged for all unreported
judgments obtained by the firm for client files The same fee is charged whenever anyone
Dowling Suzanne The ri5e and rise of the legal iltfonnation manager, paper presented to the 1996
Nnt Zealand Law Cm~ference. Dunedin. New Zealand. 9-13 April 1996
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subsequently accesses the library copy for another client This way the overhead of having
the product available in-house and indexed for easy access is covered, and the initial client
is not penalised for being 'first' by having to bear the full cost of the item, with subsequent
users paying only the photocopying cost
Before the advances in telephone technology, most librarians recorded long distance
telephone and facsimile charges against client files on paper These days such recording
tends to be done electronically immediately prior to making the telephone call. Where no
client file number is yet available, a library code is entered and later amended
Photocopying undertaken within the library (as with all copiers in the firm) is also recorded
against the client file In some firms photocopiers cannot be activated without the necessary
code Any copying done outside the firm, for example at the law Society library, is noted
and billed to the client file via a disbursement slip at the time the cost is incuned
All other externally generated library disbursements, such as the purchase of loose
legislation or the purchase of texts required for a particular client, can be billed to the
client file
Setting charge-out rates
In most firms the hourly charge-out rate for the librarian is negotiated with the library
partner or library committee Where there is more than one library staff member undertaking
research the charge-out rate will be according to the level of experience and qualification
In New Zealand these rates range from NZ$40-NZ$150 per hour
CASE STUDIES
In this article we will look at two law firm libraries as case studies in cost recovery: a
small specialist insurance litigation firm with less than twelve practitioners, and a large
commercial law firm with more than two hundred practitioners
McELROY$- ]ANE TREADWELL, FORMER LIBRARY MANAGER
(1993 -1997)
McElroys was established in November 1992 as a two-partner firm, specialising in insurance
litigation and maritime law When I was appointed Library Manager inAprill993, it was
seen by the wider law library community as something of a rarity to have a librarian in a
firm of such small size However, the partners valued the role information plays in legal
practice, and saw information management and the role of library Manager as a key part
of their practice
A cost-recovery programme was implemented from day one, as this was a small firm
which needed to keep overheads to a minimum All photocopying, long distance telephone
calls, facsimile charges, online database charges, and similar disbursements incurred on
behalf of a client were billed to that client's file
Chargingfor Research Time
The library Manager was seen as a key part of the professional team so I was encouraged
to charge my research time We negotiated an hourly rate and I kept a daily time sheet to
record all my time. Any research work undertaken on a client file was billed to that file
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Whether this time was subsequently billed to the client was at the discretion of the partner
in charge of the file. However, almost all of my time was billed and where it was not I was
given the opportunity to discuss the charge befme the bill went out
By keeping a daily time sheet I was able to demonsllate the amount of time being spent on
certain types of work In a small firm this included the usual library tasks, and also using
MS PowerPoint to draw slides for presentation in court, creating and maintaining the
client database, creating and a11anging fm the printing and disllibution of the client
newsletters and the initial consultation with website designers for the creation of a firm
website By being able to show how my time was spent and how much was spent on nonlibrary related activities, I was able to gain an extra staff member Initially this was a parttime position but over the following 12 months it grew to a full-time position The firm
also engaged a suppmt person fm the Practice Manager to undertake the client-related
wmk I was doing
Cost Recovery in Action
Cost recovery enabled me to clearly identify what was a genuine library or 'office' charge
and what was an expense incurred on behalf of a client Simple procedures often produced
huge dividends For example, when I initially started as Library Manager, recovery for the
costs associated with obtaining an umeported judgment was approximately 5-10%. Most
people mdered them directly from the suppliers to suit their immediate needs By the time
the invoice arrived the solicitor had forgotten to which file it related and so just billed the
'office' ('library') account This imbalance needed redress as we were spending in excess
of $1000 per month on this type of material and the library budget was absorbing a
considerable percentage of it
I instigated a cenllalised ordering and billing system whereby anyone wanting an umepmted
judgment had to place his or her mder with the library This system had the full backing of
the partners, which made compliance by all legal staff a relatively easy matter. The
centralisation of the system created some unexpected real savings. Previously anyone
could order from any source, but as I knew where the most cost-effective suppliers were
located, and what type of time frame delivery could be guaranteed, the initial, unexpected
savings were that the actual purchase costs decreased. Downstream savings followed as a
consequence of no longer placing duplicate orders fm the same item
All requests for judgments had to have an account number, and where one was not provided,
the supervising partner had to approve the purchase The partners did not want to curb the
legal staff's professional development reading but had to keep a check on the expenditure
in this area We kept monthly statistics on who was ordering what, so the partners were
able to see the types of cases being ordered and the staff who were ordering them
Any purchased umeported decisions were added to our online catalogue as a short record
This meant that anyone could quickly check to see if we had a decision before asking the
library to place an mder for it It must be stated that New Zealand relies heavily on
unreported case law '
TreadwelL Jane 'Electronic New Zealand case law: the options'· Australian Law Librarian 6 (2) June
1998 pp 80-84
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By the time I left the firm we had systems in place for the library budget to recover up to
70% of umeported judgment expenditure
External Photocopying
We also set up a log of all photocopying undertaken at outside libraries This enabled us to
bill the client file at the time the photocopying was actually done, thereby removing the
risk that the file would be closed by the time the invoice came from the external library
Online Charging
Searching online databases also incurred a fee and these charges were treated in the same
way A check with the solicitor prior to searching ensured they were fully aware of the
likely costs to be incurred by the client and then a disbursement slip was filled in once
searching had finished
Document Delivery to the Firm's Clients
We also offered a limited library service directly to the firm's clients Clients could call
the library and we would arrange for material to be sent to them Our usual research
charges applied to all requested work undertaken by the library This type of value-added
service was successful However, it must be made quite clear to the firm's clients and your
legal staff that you are not giving legal advice and are merely offering a document delivery
service This is essential as I discovered what would often begin as a simple "Please fax
me a copy of a statute" became a much more in-depth inquiry, as the client had no idea
what they really wanted
For example, on one occasion I took a call from a client wanting a copy of one section of
the "Australian equivalent to the New Zealand Health and Safety in Employment Act"
Wben I asked further questions it became obvious that the client had no idea that Australia
has Federal and State statutes and that in this particular instance both applied and that
there was no straight forward translation of the New Zealand section into Australian law
I was not prepared to supply the requested information without their checking on the legal
ramifications with one of our legal staff As it turned out the inquiry generated 3 days of
detailed research by the library staff following instructions from our solicitor, who then
wrote a detailed legal opinion If I had just supplied the statute as originally requested by
the client and they had relied on it, I could have exposed the firm and myself, to potential
liability
Budget Implications
All library-generated income was assigned as such in the library budget so we had a
genuine picture of income versus expenditure This information proved invaluable when
it came to reviewing the library budget and, as I have already mentioned, allowed me to
fund an extra staff member
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BELL GULLY- GAIL DAILIMORE, MANAGER, RESEARCH & LIBRARY SERVICES
Background
Bell Gully, the commercial law firm I work for as the Auckland Research and Library
Services Manager, has been recovering costs for database searches, photocopying,
legislation and books supplied to external clients ever since the library was set up in 198 3
In this part of the paper I will focus my discussion on recording and billing librarians'
time at Bell Gully and in particular, on the Auckland office
Ib put my remarks in context I need to give a brief glimpse of the firm
Bell Gully is the largest and oldest law firm in New Zealand We have two hundred and
twenty two practitioners including sixty-five Partners in two offices in Auckland and
Wellington We specialise in corporations law- takeovers and mergers, tax, trade practices,
insurance, intellectual property, commercial property, local government and environmental
law We have two libraries - one in Auckland and one in Wellington, each with their own
Library Manager, plus three full-time library staff in each city We also have an Information
Technology department and Precedent Manager who work closely with the library We
run an Intranet using Topic software for the information crunching with Explorer as the
browser interface Publishers provide us with Folio Views flat files which we convert inhouse and run on Tbpic over our network The Intranet covers our infobanklprecedent
database, the library database of texts, indexed journals and judgments, the District Law
Society database (LINX) and Briefcase, newspaper index (NEWZ), plus several specialised
databases and finally, but most importantly, full-text New Zealand statutes and regulations
The Intranet is available from everyone's desks and all practition~rs have been trained by
library staff to use this as a research tool This training is ongoing
My background is in teaching and research and then libraries I joined Bell Gully in 1987
from the Uni,ersity of Auckland's New Zealand and Pacific Library TWo months after I
arrived the stock market crashed. The huge commercial deals drawn up on paper napkins
over lunch stopped The firm geared itself to meet a tightening economy
Timesheets
Early in 1988 the firm's Board, made up of senior partners, asked me to record all the
research I carried out as chargeable units to client files Given that solicitors use timesheets
which are sent daily to data entry to record against the client's file number, my simplest
option was to follow this process At that time one librarian and two part-time students,
who totalled between them ten hours per week, staffed the library in Auckland In 1989
another professionally qualified librarian was employed full-time in Auckland
In 1989, as the New Zealand market continued to contract, one of my library partners
thought we should also record non-chargeable time just as solicitors do and to code this
work to particular departments The litigation partners were concerned that bottom line
thinking by non-lawyer management could lead to the library being cut back We needed
to be ready to demonstrate firstly that we should be regarded as fee earners for the firm
and hence an asset (not just a hole that money is poured into) and secondly that all
departments in the firm, not just litigation, use the library
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Non-chargeable codes are used for all work that people say "charge to office" or where
there is no client file Om non-chargeable codes have been adapted from those used by
solicitors and each department is given a code, for example, A20 represents Auckland
litigation, W20 Wellington litigation, AIS Auckland commercial and taxation, AIO
Auckland banking, A25 Auckland pmperty and resomce management, AOO Auckland
administration including management, information technology and marketing
We use 302 and .306 for document supply and research respectively We use !52 for journal
indexing and cataloguing, I 04 for general administration of the library for example, shelving
and managing the collection, 262 for staff development, 254 for library meetings, 202 for
preparing information for inteinal or external seminars to be given by practitioners This
code is also used for teaching research skills and the use of the library to legal staff
Om timesheets each day will have chargeable and non-chargeable entries For example,
302 A20 means document supply of ajudgment or journal article for Auckland litigation,
306 Al5 means research for the Auckland commercial department Ihe most common
chargeable code we use is RES (research) and we assume that no work can be done in less
than two units Each librarian has a charge-out rate depending on experience, ranging
from $60 to $125 per hom Each of us has a budget we are expected to meet, although we
are not under the same pressme as solicitors and partners We receive individual monthly
performance (budget) reports and the library partner and I receive a print out of nonchargeable time so that we can assess library usage thmughout the firm I he library partner
and I also receive a report so that we can check whether librarians' time is being billed to
clients or written off Often it is premiumed which demonstrates the value of the information
to the commercial transaction If a partner or solicitor develops a pattern of writing off
librarians' time, then the library partner follows this up. lime recording and billing
librarians' research to clients is quite well established in om firm
Ihe fees generated by librarians go into the overall firm's income but are produced as
monthly income and expenditme reports for the library This means our fees are shown as
offsetting library expenditure We could equally well offset the fees earned against salaries
for librarians as to date our annual library income has covered the annual cost to the firm
of three librarians' salaries
The library has some clients who come directly to the library For the most part these are
already clients of the firm We bill these people directly I think care must be taken to
confer with the partners who service these clients to ensure we are not taking business
away from solicitors Most of this work is keeping outside clients up-to-date with changes
to legislation. There is some research but no analy1is or interpretation of the law If clients
come directly to us for database searches, they receive the results in raw form in much the
same way as om solicitors. I recall one QC who had come directly to us for a LEXIS
search being somewhat taken aback when he received a printout of 'keywords in context'
rather than a carefully analysed opinion
Disbursements
All external database searches are charged to clients as disbmsements in just the same
way as toll calls, photocopying and facsimile charges Any legislation
or information obtained and charged to 'office' is coded to the department requesting the
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material We have done this to counter slashing the library budget and to ensure that we
are in a position to show what solicitors and departments, rather than librarians, are
spending We are also in a position, should each department become a cost recovery unit,
to provide information on how much departments should allow in their budgets for library
materials per year
WHY Cos1 RECOVER IN YouR LIBRARY?
Advantages
Operating as a cost-recovery centre with librarians recording their research time, gives
us a better understanding of the firm's raison d'etre- to generate income It also gives
us a better idea of the pressures placed upon practitioners to meet budgets. This increases
our awareness of the need to be service-oriented and customer focused
By charging for library services the profile of the librarians is raised to the level of feeearner within the firm- valued members of staff rather than merely an economic drain
In some cases, the hourly charge-out rate for the librarians will be more than junior
solicitors There is normally a commensurate increase in productivity and quality arising
from an increased sense of self-worth
Time recording also allows the librarians to identify who is, and more importantly,
who is not using their service That presents a marketing opportunity to target those
people
Recording disbursements highlights those products, especially electronic, that are in
high demand This can be used to justify continued subscription, m conversely,
cancellation
•
Collecting statistics from time sheets and disbursement charges clearly demonstrates
the library's role within the firm This provides an information base from which to
justify the very existence of the library It can be used to justify a new staff member or
show that downsizing may not be as cost-effective as it first appears The short-term
financial gain, that is the loss of a staff member or even closure of a library, fails to
appreciate the librarian's long term benefit to the firm's overall performance
A 199.3 survey in the US stated that:'
In-house libraries save organisations as much as three times the cost of their operation
and use by reducing the time that professionals would otherwise have to spend to
acquire needed information
•
Managed efficiently, the billing of the librarians' research costs to the client should
result in lower overall costs to the client, while freeing up authors to undertake more
analytical and opinion-based work
- - - - - - - - - - - - - -
Griffiths Jose-Marie and Kind. Donald W Special Librarie5 Increming the Information Edge SLA,
1993
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Disadvantage~
•
The discipline of recmding time and disbursement costs needs to be established. Systems
and forms need to be created thereby making the process easy fm the library staff
Initially this is a change of mindset and business practice for most librarians
•
It is important to ensure that the recording takes place as the research 01 disbursements
are incurred. This way administration does not become a burden
•
Some practitioners believe that library-related expenditure should be reflected in the
hourly rate that partners and legal staff charge This means that the library's role within
the firm is never accurately presented to clients. The ability to recover the true and
actual costs associated with legal research and legal information are therefore not
possible
There is also another reason fm passing on the costs associated with legal information
If you identify such expenses on the accounts you send you clients, it alerts them to
the fact that you have actually done the research . It shows your clients that you
have access to the information, and you do utilise the resources available'
CONCLUSION
A review of a law firm's expenditure on library materials and the recommendation of a
cost-recovery programme can result in the employment of a librarian Ibis is usually a
direct result of being able to demonstrate the value of professional information management
The costs of a librarian's salary can be offset against the savings made in cost and
disbursement recovery
Cost-recovery runs counter to traditional library practices but it needs to be seen in the
context of commercial reality Librarians need to appreciate that law firms are businesses
Private sector librarianship differs in many ways from the public and academic sectors
and a cost-recovery approach in those libraries may not be appropriate
Although our experiences have evolved in quite different environments, we conclude that
cost -recovery is a most effective way of operating private law firm libraries
Treadwell Jane Making yam library dollar go fUrther" paper presented to the 1996 Nevv Zeafand
Law Conference. Dunedin, New Zealand 9-13 April1996
CCH AUSTRALIA LIMITED
will offer 5 $1,000.00 bursaries to
"Strait to the Future"
8th Asia Pacific Specials, Health and Law Librarians' Conference, Hobart, 1999
The Australian Law Librarians' Group thanks CCH
for their generous support.
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